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Testy Tuesday Morning – Big Data Day

Busy, busy today with lots of data! 

At the moment (8am), I only know that retail sales were flat to last week, which was 1% better than last year but this week is 3.3% better than last year because LAST YEAR TOTALLY SUCKED!  That’s right, we are now comping to numbers that are so atrocious that in order to miss them we would have to all dig holes in our backyards, cover them with tarps (no, not the bailout package but a good conceptual image) and drink only rainwater and eat earthworms.  Anything better than that will give us more economic activity than we had last November, when the market was completing a 50% dive off the previous year’s highs and we weren’t sure there was going to anything to be thankful for on November 27th

Our market hit rock bottom on November 21st, the Friday before Thanksgiving (and an option expiration day) at about 7,500 on the Dow.  People were generally shell-shocked but we did bounce back to 8,500 and drifted around there through Jan 1st (9,000) before plunging to 6,500 by March 9th.  THAT my friends, is the period we are comping against!  So beware "improvements" being sighted in the MSM as we are now comparing our weak recovery to a total train wreck and yes, it’s much better now, but better in the way that the Chicago Bears (4-6) are better than the Detroit Lions (2-8), not the way the Minnesota Vikings (9-1) are better than the Lions.

Later today we have an update (and downgrade) of our Q3 GDP followed by Redbook Chain Store Sales and Case-Shiller Home Prices at 9.  At 10 we get Consumer Confidence (or lack thereof), the FHFA Housing Price Index, the Richmond Fed Report and State Street’s Investor Confidence Index.  Later today we have the results of a massive $39Bn 3-year Note Auction, the Fed Minutes at 2pm along with Industry Charge-offs and, finally, at 5pm we get the ABC Consumer Confidence (if any) Index. 

It’s a very brave bunch of bulls who have run the futures up half a point off their lows this morning with all that data coming up.  When I say brave of course, I mean the disgustingly manipulative and should be thrown in jail kind of brave but, since none of our regulators seem to care about the nonsense that goes on every day at the commodity and futures exchanges – I guess they are not so brave after all as there is no downside to their actions

That’s really fine with us as we just reviewed over a dozen upside plays on our new Watch List that will benefit from some manipulation but, as it was at the beginning of the month, our hearts are not really in the bull camp.  We closed out yesterday more than 55% bearish as today just seemed to be too data-heavy to support yesterday’s run. As I predicted in the morning post, the futures pump was not sustained but we did finally get our test of 10,500 but we failed to hold any of our highs so we had a great time playing the 75-point intra-day drop and setting up more bearish plays like DXD, TZA, FAZ, EDZ, VIX, DIA (puts) and RTH (puts).  Those were our short-term bets from the top but we did pick up a couple of bullish plays in the afternoon as we don’t hate everything, just a lot of things at these prices. 

As generally expected, our revised GDP came in at 2.8%, down 20% from the original estimate which boosted the markets considerably (and falsely).  If you subtract the 3.2% that was added by government stimulus, we are still in a recession, just one that is being bailed out on a scale that has never been attempted before. 

Here’s a little reality for you (skip this paragraph and the next if you don’t like bad news):  According to a report from First American CoreLogic, 23% of all U.S. homeowners with mortgages – 10.7M – now owe more to the bank than their house is worth. More than 5.3M of those mortgages are at least 20% higher then the home’s value. Noting the close correlation between negative equity and foreclosures, firm calls the trend "an outstanding risk hanging over the mortgage market."  

While more than 40% of borrowers who took out a mortgage at the peak in 2006 are under water, prices have dropped so much that some borrowers who took out loans more than five years ago also owe more than their home’s value. Given this, it’s hard to believe we’ve broken out of the housing death spiral.  Calculated Risk reminded us yesterday that existing home sales aren’t as crucial to the economy as new home sales, housing starts and residential investment; and the "distressing gap" (caused by a flood of distressed sales) is still distressingly large.

Something distressing happened in Asia this morning – the Shanghai Composite sold off!  Not just a little either, they were soundly rejected back at our predicted rejection target at 400 and fell back 3.5% on the day on big volume.  The second red day of the month for the "well-regulated" Shanghai freaked out other Asian markets and the Hang Seng dove 350 points after lunch before finding "support" at last week’s low of 22,400.  The Nikkei went down and down all day but only 96 points overall (1%), finding support at the 9,400 mark, which is farther below the Dow than at any point in the past 5 years

Attempts to keep the commodity baloon inflated by holding down the dollar are taking a constant tol on Japan and the BOJ is now under pressure from their own government to take action.  At 0% interest, the only action the BOJ can really take to devalue their currency is to start buying up Dollars, so this is going to be fun to watch…  "Investors are becoming pessimistic about Japan’s economy. They are frustrated and very disappointed the government has not been able to launch measures to spur the economy," said Masatoshi Sato, a market analyst at Mizuho Investors Securities Co. Ltd.   

Over in Europe, they are flatlining ahead of the US open and Germany is extending its jobs stimulus program, which keeps people on the job by paying them the same for working less hours.  Banking stocks have kept pressure on the EU markets at the S&P issued a bearish report on the global banking industry.  What report, you may ask?  The report that is not reported at all in the US media in which the S&P "has given warning that nearly all of the world’s big banks lack sufficient capital to cover trading and investment exposure, risking further downgrades over the next 18 months unless they move swiftly to beef up their defenses."

Every single bank in Japan, the US, Germany, Spain, and Italy included in S&P’s list of 45 global lenders fails the 8pc safety level under the agency’s risk-adjusted capital (RAC) ratio. Most fall woefully short. The most vulnerable are Mizuho Financial (2.0), Citigroup (2.1), UBS (2.2), Sumitomo Mitsui (3.5), Mitsubishi (4.9), Allied Irish (5.0), DZ Deutsche Zentral (5.3), Danske Bank (5.4), BBVA (5.4), Bank of Ireland (6.2), Bank of America (5.8), Deutsche Bank (6.1), Caja de Ahorros Barcelona (6.2), and UniCredit (6.3).

Really, go check your sources right now and try to find this report.  Do it before they all get embarrassed after reading this post and fix it.  You would think this sort of thing would be leading the news, not buried.  If I accomplish nothing else at all with my writings, I hope I at least get you to question the sources of the information you rely on to make decisions!  

The "safest" global bank is HSBC (9.2), followed by Dexia (9.0), ING (8.9) and Nordea (8.8). UK banks fare relatively well: Standard Chartered (8.1) is in the top quintile; Barclays (6.9) is in the middle. The study left out RBS and Lloyds because their status is unclear. Chinese banks – the world’s largest – were excluded. 

Many banks on the sick list are already cleaning up their books, mostly by disposing of assets or converting hybrids into common stock. Citigroup exchanged $64bn (£38.5bn) of hybrid equity in the third quarter. UBS has cut reliance on hybrids, still 80pc of its capital earlier this year.

Japanese banks score worst because they rely on hybrids and are major players on the stock exchange, buying equities at 12 times leverage. Equity virtual portfolios make up more than 50pc of their capital. This could prove troublesome given Tokyo’s bourse has fallen this year, missing out on the global rally.  German banks do poorly because they have large holdings of asset-backed securities (ABS), often toxic. US banks look healthy in terms of leverage, but look less pretty when this is adjusted for risk.

S&P said past focus on leverage alone had been a recipe for trouble. It encouraged banks to opt for dodgy products – treated as if equal to top-notch sovereign debt – and could be circumvented "off-books" in any case. Rules created the illusion of safety.  The illusion of safety – that’s a great summation for the entire market at the moment, so be careful!

 


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  1. So GDP is revised downwards .7% from the initial 3.5% which at the time created a nice bogus runup of the market for the day.   Let’s see what sleight of hand is used today to distract this ADD market from this 20% reduction in reported GDP.    Probably doesn’t matter anyway since the reserve banks can borrow at zero and do some dark pool magic to goose the market.


  2. Cwan – i had the same exact experience w/JNJ! At least i can’t blame you for it. I rolled my NOV $60 to dec thinking i would outsmart the caller.  fortunately I was ahead in the stock. hope you were too.
    My question is how could they exercise before the market opens?
    Phil: glad you are feeling better. I was up at 3 also but i was reading Slaughter house five again. I hate computers in the middle of the night. probably why your rich & i’m paying you. :) My next question if you have bothered to read this far:
    when you guys say you are going into the weekend in cash, what exactly do you mean? I have options i will be rolling for the next few years it seems and long stocks, etc so when i read that i think i’m in big trouble and they are wise. Is that total cash or some portion? thanks


  3. Phil I like your opinion on COF now trading at 37.80 sold DEC 37p for 1.20 now 1.32 DEC 45c for .87 now .08
    My question what would you do close the caller and stay with the put or ????


  4. Phil,
    Have tried to get a friend on the free trial membership and error message indicates that the address is incorrect.
     We email all the time and I’ve confirmed that the address is correct.  Who do I need to talk to?


  5. Phil, I just saw an interview with Faber/malone re Sirius, I wasn’t aware that the 1/2 billion loan had been paid off already, is this worth playing in your opinion?


  6. HK w/ a nice big upgrade today !!


  7. GDP/LV – It is such a joke.  No one is ever held accountable for putting out numbers that are off by 20% and the media never mentions how wildly inaccurate things can be unless it happens to disagree with the point they are making. 

    MTD hitting new highs – that’s one of my medical favorites and an old Buy List resident!

    Watch levels are the same as yesterday – 25% (up from July base) was: Dow 10,250, S&P 1,100, Nasdaq 2,187, NYSE 7,000 and Russell 600.  As usual, it’s the Russell that gives us problems but the Nas isn’t over yet either so let’s see what happens.

    Watch last week’s highs for a re-test (but doubtful we’ll break any without all 5 indexes over the 25% line) at:  Dow 10,471, S&P 1,113, Nas 2,205, NYSE 7,266 and Russell 605.

    I’m not too worried about the DIA $104 puts as they are up just .10 from yesterdya’s 1/2 sale and we don’t know if this is a real sell-off yet (volume is still low) so the old "When in doubt, sell half" rule still applies. 

    Make sure you check out the new Watch List.  I won’t be here after 1pm tomorrow but all these are good stocks to hold in an upside market.  We will hold an active chat there (I’ll move it to under the Portflio tab later) so please feel free to make suggestions on that post for additions

    If the S&P breaks 1,100, that would be a good time to stop out the DIA put covers for the duration! 


  8. HK / Cap – It is still continuing it’s downtrend. Do you think it’s heading back down to the 18.5 area?


  9. LOL Morx!  Cash as in mostly cash and well-hedged positions that I’m not worried about a 500-point drop hurting (or at least there is a willingness to scale in at those levels).  Cash means flexible and not overly exposed to big moves but I do advocate having a good amount of actual cash on the sidelines to take advantage of big moves in either direction.  Don’t forget I’m 9,800 bearish, 9,100 would surprise me – I’m not back to 7,500 bearish at all, I just want to see a good honest correction followed by some old-fashioned consolidation and THEN I’ll be willing to consider S&P 1,200, maybe in Q2 next year if all goes well.

    COF/Yodi – We sold the $38 calls last month so that was my opinion and they were down to the wire on Friday.  I don’t like them (and certainly not over $40) but they are a very dangerous stock to short.  As you sold the put, I don’t like that at all because IF COF falls below $36, THEN you probably don’t want them do you?  That’s not why we sell puts…

    Message/Joe – That’s strange, I didn’t even know we had a message like that!  Did you do the referral though the link at the top-right of this page (manage your account area)?  Send Greg the details (admin at philstockworld dot com).

    SIRI/Jamie – It’s such a joke of a momo stock I stay away usually (we were last buying at .57 but then got out as they went up) but I do like the company long-term.  I think to play SIRI, either wait for them to sell-off to .57 again and then play for a dime or, if you think you are willing to risk a dime, you can just buy the June $1s for .10 and offer to sell 1/2 for .20 so you have a free ride.  If they get bad news, you should be able to get out with .05 and big news can give you nice gains.  Once you do get the stock at .57, of course, try to sell the June $1s for .15 as that’s a nice spead

    HK/Cap – Not doing anything for them.  That’s a bunch of recent upgrades leading to sell-offs, a very bad sign! 

    Oops, another bad sign is the S&P failing 1,100! 


  10.  strange, dollar is only up .11%…


  11. That little stick attempt on the futures at 9:00 got sold into. However, sell-side volume is dropping and the buy bots are relentless.


  12. Data coming in:

    September FHFA Housing Price Index (.pdf): +0.2% vs. an expected +0.1% and compared to -0.3% in August. Year-over-year, prices are down 3.8%. Biggest regional movements: Mountain Division -1.4%, Pacific Division +1.9%.

    Nov. Consumer Confidence: 49.5 vs. 47 expected and 48.7 in October. Expectations 68.5 up from 67. Present situation 21 vs. 21.1 last month: "The moderate improvement in the short-term outlook was the result of a decrease in the percent of consumers expecting business and labor market conditions to worsen, as opposed to an increase in the percent of consumers expecting conditions to improve. Income expectations remain very pessimistic and consumers are entering the holiday season in a very frugal mood."

    Redbook Chain Store Sales: +2.8% vs. +2% last week. Redbook now sees November sales +4.8% compared to October, noting seasonal goods are in demandMore data confusion!

    Nov. Richmond Fed Mfg. Survey: 1 vs. 7 last month (above 0 = growth). Growth in shipments and new orders tapered off, while employment returned to negative territory after being positive for the last two monthsYet Redbook sees Nov sales + 4.8%, doubling the previous gain.  Like I said, the comps really suck but they are STILL being overly optimistic

    Notwithstanding headlines about the dollar’s plunge, Paul Krugman notes it’s still stronger than early 2008, and says the fall since the safe-haven peak "has been trivial compared with the huge decline from 2002-2007." By peddling scare stories, the media’s "diverting attention from the real threat: mass unemployment," he says.

    Naked on DIA March $106 puts until the S&P gets back over 1,100.  Roughly 10,320 is the next test for the Dow, that’s around Friday’s highs


  13. what happened to the U.S. Postal losing 2.5 billion……..where was this headline??!!!
    hidden away…..yup…they write what they are told!
    http://abcnews.go.com/Blotter/story?id=5870048&page=1


  14. Phil,
    On the PGH buy/write – you said sell the 10 P + C for 2.20 but you didn’t mention the month?


  15. Zion has to be the easiest stock to play…. Sell 3X covered calls on an up day (like yesterday) and sell them the next day as the stock falls, and wait for the next upday, and follow the same plan. Have been doing this forever and you don’t even have to be fully awake.


  16. PHil, I too believe VLO is a solid company but how much further do you see it falling? Do you see them cutting their dividend?


  17. Gel: ‘Sell 3X covered calls on an up day (like yesterday) and sell them…’ you mean sell 3 calls for every 100 held and buy back as stock falls?


  18. Originally did a buy/write on TNK in May at 11.42. What options/month do you suggest?
    thanks


  19. Postal/Shane – They lost $5Bn last year so $2.5Bn is "getting worse more slowly."  If they were a stock, they’d be up over 100% on this news.  Meanwhile that’s a non-profit losing $2.5Bn out of $70Bn in revenues.  They use 1Bn gallons of gas a year so there’s a big variable cost and they deliver 200Bn letters a year so they could wipe out the deficit by raising rates a penny – which would mean they come to your house and pick up a letter and hand-deliver it anywhere in the country for .43 instead of .42.  Sorry but it’s a pet peeve of mine that people use the post office as an example of bad government when the cost of mailing a letter is one of the only things we use every day that has gone down in relative price for the last 100 years of capitalism.  

    Looks like 1,100 is still holding up.   Other bullish levels that need to be taken are Nas 2,187 and RUT 600.  The Dow and the NYSE are well above those danger zones and they are still trying to get the dollar to $1.50 for the Euro.  Gold touching $1,170 but oil at $76.25. 

    Good to go long on oil here actually in the futures at $76.25 with a .05 stop, looking for .25.


  20. magret
    I have 2000 shares, mostly acquired by having the stock put to me after selling puts. Selling covered calls, usually you would match up your stock position with the covered calls which would, in my case, be 20 contracts. Since I am confident the stock will fall back the following day, or soon thereafter, I take a larger than normal position (3X) which would be 60 contracts. I then buy back my callers, take the receipts and sell more puts. The stock is a real yoyo, and follows this pattern most of the time.You can make money playing it both ways. I don’t know if Phil would approve,as he might have a better plan, but it works for me.


  21. I was a consultant to the postmaster general in a prior lifetime and did large scale IT projects there.  They have such a bad image, but from the inside view it is an incredible operation.   Nonstop efficiency on a scale difficult to imagine.


  22. Phil, Just to make my point for me re RMBS, the stock was down 7% yesterday on news of its agreement with the EC (old news, but I guess not old for the market) and up 7% today on an indication from the company that the antitrust trial is proceeding in January.  I’m just buying and selling puts and calls as the stock bounces between $16 and $20, but I feel like I could be doing much more.  If you didn’t see my post on RMBS, I left it at the end of the day yesterday.


  23. FDIC: Number of troubled banks rises to 552  -
    Marketwatch


  24. speaking of oil, need help with XOM. bought the Dec $70 put, getting wiped out; bought the $80 call, also strangely not moving. Thoughts on selling puts to make up the loss?


  25. Data………..What data,…………nothing to see here, just move along.


  26. Last night I decided to do a little clothes shopping.  I was definately looking for bargains and they were everywhere.  I went to an outlet mall where all of the stores were advertising Black Friday sales happening now.  At one store I bought things for 40% off and received an additional 15% off the entire purchase if I spent over $75.  This is before Thanksgiving.  Retailers know that consumers are strapped and are fighting for your Christmas dollars NOW!!  If they have to cut prices leading into Christmas I predict this is going to be a sad event.  The weight of this market and the shenanigans is getting extremely heavy even for the govt. and GS.  The rug has to get pulled at some point.


  27. PGH/Jomp – That was selling the July $10 puts and calls, maybe $2.30 can be had

    VLO/Jrom – They SHOULD cut their dividend to reduce capital costs.  I think $15 should hold well enough but this is a long-term hold.  Even at $16, you can sell the Jan $17.50s for .40 so figure .20 a month is $2.40 a year is a 15% ROI selling out-of-the-money calls alone.  That’s not the play now but I’m just saying as long as you see a clear path to making that kind of money on a monthly basis, then everything else you get is a bonus.  Entering at $16 and selling the Jan $15 puts and calls for $2.05 is net $13.95/14.48 – that’s not a bad entry and beats any dividend you’re likely to get over 60 days.

    TNK/Drum – Is $11.42 your net?  They are riding out their earnings loss at the moment so you don’t really want to cap a rebound but if you can sell the May $7.50 puts for $1 then that’s a nice way for you to pseudo double down at $6.50 to drop the avg to $8.96 if put to you (much better than you would do if you DD right now at $8.15).  Then your goal (at basis $10.42 on your 1x) is to sell the May $7.50 callls (now $1.20) for about $2 or better, which would drop your basis to $8.40/7.95 less the dividends (hopefully).

    Postal/LV – That’s cool.  My Dad was a systems analyst who wrote a lot of big government systems (CETA, Head Start, Office of Aging, Chigago’s Accounting Program) back in the old days so I have a  deep appreciation for what goes on behind the curtains.

    RMBS/Judah – And I answered it at the end of yesterday with a bold pick!  8-)

    RMBS/Judah – Actual trial results can take a while but it is a very good story on them.  People seem willing to pay up for calls and you like the stock so why not go for the May $15s at $5.30 and sell the Dec $17s for $1.11 and the Dec $16 puts for .85?  That’s net $3.34 on the $2 spread.  As long as you are willing to DD on the longs then no big deal if they break up and the Jan $19s are $1.20 so that’s your roll.  I also like the 2011 $7.50 calls for $10.60, selling the $17.50 calls for $6.20, which is $4.40 on the $10 spread with a break-even way down at $11.90

    RMBS – There is also an interesting play if you REALLY want to own them at $12.50.  Buying the 2012 $10 calls for $10.50 and selling the 2011 $17.50s for $6.20 and the 2011 $12.50 puts for $3.70 is net .60 on the $7.50 spread.  If RMBS falls 25% to below $12.50, you are in for net $13.10.

    Oil play failed and we tested $76, which is very strange on this big move back up so either something is very wrong with oil or this latest up move on the market and gold is going to snap back again.

    XOM/Morx – The puts and calls were about .60 total right?  The idea was that, at some point in the month, XOM would move $5.  Hasn’t happened yet and the VIX is down so we have to take lumps to stick with it.  Of course I like the spread better at .40 than I did last week at .60 now…  If you want to get fancy you can sell 1/5 the $75 puts and calls for $3 to pay for the spread but you have to be super-careful about being blown out by the exact move we were playing for in the first place. 

    Data/JRW – Oh that was so 10am!  Now we look forward to another bland statement (minutes) from the Fed at 2pm which the market movers are free to spin however they need it to be. 

    Investor confidence fell from 108.4 to 100.8 but I didn’t even hear that one mentioned on CNBC this morning. 

    Investor Confidence Index Graph

    Look how fast Asian confidence is leading us down.  I thought Asia is where everything is so great that they are going to lift the entire planet on their shoulders and take us to new highs of benevolent consumerism???

    Nov. State Street Investor Confidence Index: -7.6 to 100.8, just barely above the 100-level, which is neutral. "Across all regions, institutional investors are largely treading water; neither increasing nor reducing their aggregate holdings of risky assets," State Street says. "Investors… desire to see more evidence of real economic activity and aggregate demand, particularly in the U.S., before adding to equity exposures."

    Q3 FDIC Quarterly Banking Profile: FDIC’s deposit insurance fund drops by $18.6B to -$8.2B, the second time in its history the balance has gone into the red. Problem banks swelled to 552 from 416 (up 32%) last quarter. Banks profited a collective $2.8B, while loan balances dropped 2.8% or $210B, the largest decline on recordYep, move along folks – nothing to see here

    Third-quarter FHFA Housing Price Index (.pdf): +0.2%. Monthly HPI for September was unchanged from August, revised down to -0.5%, compared to an expected +0.1%. Year-over-year, prices are down 3.8%. Biggest regional movements: Mountain Division -1.4%, Pacific Division +1.9%.  Wow, way to slip that -150% revision in quietly

    More from the Gang of 12 Circle of Upgrades:  GE Capital (GE +0.6%) continues to stabilize, JP Morgan says, predicting a dramatic narrowing in losses over the long-term. "The several ‘hot spots’ in the GECS portfolio have now been reduced to one," CRE, firm says. "In total, management continues to see provisions a bit better than the adverse case, which makes a capital contribution beyond the fixed charge coverage requirement in 1Q 2011 unlikely."

    With lawmakers breathing down banks’ necks, don’t be surprised if your bank doesn’t want your business anymore, Dick Bove says, citing as evidence HSBC’s (HBC) move to evict retail investors’ gold from its vaults. Bove thinks as many as 30% of U.S. households could be forced out of their banks because they’re not profitable enoughNow that’s a confidence booster!


  28. Phil,
    What’s up with the VIX? Seems like it’s been pretty disconnected from the market’s gyrations lately.


  29. Thanks, Phil. Don’t know how I missed your earlier post on RMBS. And thanks for the recommendation on selling EDZ puts.  I’ve done something similar with EEV, which doesn’t have as much juice as EDZ but I’m more familiar with its rhythms since I’ve played it successfully before.


  30. It’s looking like we may drift like this all week. I’ve actually added some short condors and short straddles this morning on names like AMZN, SPG, and AAPL. In many cases this is on top of short positions I have already in these names (not AAPL), so I’m still happy if we get a break-down, but not counting on one.
     
    December options are not long for this world once you price in the holiday, and I’m happy to sell them — would not want to own any except as parts of short condors, etc.


  31. Hi Gel1,
    I like to try  your idea but did not buy the stock only set up a strangle 15c/12.5p you did not mention the month but I take it it would be DEC ? 
     
    gel1
    November 24th, 2009 at 10:25 am | Permalink  
    Zion has to be the easiest stock to play…. Sell 3X covered calls on an up day (like yesterday) and sell them the next day as the stock falls, and wait for the next upday, and follow the same plan. Have been doing this forever and you don’t even have to be fully awake.


  32. Clothes/SS – I know, I’m seeing that too.  When the PTA crowd is over they talk about where the sales are and if someone buys something for even close to retail they are immediately chastized. 

    I see us flatlining here for the day at 10,400, S&P 1,100 but then a sell-off either tomorrow or Friday.  Down still makes more sense than up…

    VIX/Chuaeu – Driving relentlessly back to 20.  Last time the VIX hit 20 was 10/23 and that was when we got the big dip from 10,100 to 9,700 over 5 days.  A similar move would take us to about 10,000 even to end the month and we started at 9,700 so that wouldn’t even be a bad month overall

    EEV/Judah – There is a lot to be said with playing the things you are most familiar with.  The less sure I am about the market, the more often I go back to my usual suspects. 

    Speaking of the usual suspects.  WFR finally found a floor it wants to defend at $12.   Selling Apr $12 calls for $1.75 and Apr $11 puts for $1.15 is net $9.15/10.58, a nice 33% profit if they hold $12. You can initiate ownership by just selling naked Jan $12.50 puts for $1.15 as this stock is usually nice and volatile with lots of things to sell.

    In fact, let’s call that a $100KP play, selling 5 WFR Jan $12.50 puts naked for $1.15.


  33. Phil: was not around for watching/trading:
    what’s the DIA put situation to hold ? naked ??
    Are you bearish now for the rest of week ?


  34. Phil,
    GE Jan 2012 $10 call for 7 (<$1 premium). What do you think?


  35. japar, GE has a nice slanted inverted head and shoulders, measured move says it "should" make 17 by dec expiration.
    Maybe a 15/17 Dec bull call spread? I was just eyeing that myself.


  36. phil, did you already answer the usg play that someone asked the other day?  Selling Jan 15 2011 Puts for 4$ + ?


  37. Can some one assit me in the WSS portfolio
    yesterday I filled on TOS the 10 EDZ  at .60 and I have At WFR filled 3 @ 1.20 and 3 @ 1.15 I tried to place them all in the WSS portfolio but both show open and not filled Surely they can not control at what price I get filled ???


  38. Further to the above the SRS I filled on TOS yesterday @ .79 WSS called it expired ?


  39. Gel, Thanks for the explanation re ZION. What do you think are the resistance and support levels….


  40. Phil:  What do you think of the XOM Dec 70/80 strangle (reccomended last week) Should we hold ?


  41. Magret: see XOM post above (11:23). I was asking the same question.


  42. Drift/Eric – I see the same thing.  Good point about the holidays making this a shorter expiration period than it would seem (which is why we’re already selling mainly Jan puts and calls). 

    DIA/RMM – We’re on the 1/2 cover with the S&P over 1,100 ($104 or $105 puts) but I’m still more bearish than not

    GE/Japar – I like GE but I’d only do that call if you are selling something.  Actually, I’d rather have 7 2012 $12.50 calls than 5 $10 calls for about the same $3,500 as you sell the same Jan $16 puts and calls for $1.58 but you collect $790 in 60 days on one and $1,106 on the 7.  That means, over the course of 2 years, you’ll collect about 12x $316 more by taking 7 $12.50 calls or $3,792.  That’s an EXTRA 100% ROI for NOT saving yourself .50 in premium!

    USG/Jo – It’s a nice sideways play on building coming back but I’m not seeing much evidence of that happening.  As it stands now, they don’t make money at all so those $15 puts would make me nervous, even with the nice buffer.  You can take the May $10/12.50 bull call spread for $1.50, which pays $2.50 at $12.50 (66%) much faster than your puts pay off.  If you buy 4 of those for $600, you make the same $400 you would make selling the 2011 $15 put for less margin in 1/2 the time at a 20% lower price but, as I said, I’m not too bullish on them myself.

    WSS/Yodi – As far as I understand it, they will only give you a fill if either the ask price or a sale goes by at the price you offer (assuming you are doing limit orders) after you place the order.   I have certainly noticed that TOS gives me much better fills than WSS.

    XOM/Magret – I still like it but Eric made a good point about December expiration being closer than we think due to the holiday.  If it’s a fun bet, then you can stick with it.  We’re looking for a violent move in XOM that pops one side or the other up to $1.  Looking at XOMs daily charts – that’s not at all far-fetched…. 

    Don’t forget Fed minutes at 2pm!

    Commodities are haunted by a possible "Sub-Prime II" crisis, Citigroup (C) says, where prices are undermined by a "nightmare scenario" of surging rates and a dip back into recession – which would "demonstrate that investors never learned anything from the shock waves that descended on global investment."

    Talk about the dollar carry trade is a "half-truth," say J.P. Morgan analysts: There is a "burgeoning, even bubble-like" trade going on, but that always happens after recessions, and positions against the dollar are only half what they were before Lehman’s collapse.

    Very big article on Asset Class Cycles.

    This is exactly what I’ve been warning about:

    Deep concern about both the credit crisis and cutbacks in consumer spending has translated into retail strategies marked by caution, Cohen noted. “Manufacturers produced less, and retailers ordered less. In the run-up to the 2009 holiday season, everybody was in a conservative mood.”

    When all is said and done after the holidays, filing for Chapter 11 bankruptcy protection may be the only option for many chains, Cohen added. “I certainly see more bankruptcies down the road,” he said. “And we will also see vacancies going up at shopping centers and malls across the country."

    With China down over 3%, the baltic dry index down for the third straight day, and Russia cutting interest rates to record low levels, the early tone for emerging markets is looking a little shaky:


  43. Thanks Marx


  44. Hi Phil: A few weeks ago, I sold  Feb. $5 puts naked on AIB for $.80.Now are $.90 I’m now thinking of  buying the stock at $5.17 and selling the Feb . $5 calls for $1.05.What’s your opinion.
    dflam 


  45. By the way gold bugs – note the weekly chart of gold priced in Euros.  Last time we were up here was the Feb financial panic when the world was going to end and they dropped 20% within a month after that. 

    From a Yen perspective, we are also at the top of a previous high, but this is the July 2008 high that preceded a massive market sell-off (come to think of it, so did the Feb high in gold).  So we have 2 weekly charts where gold is back at long-term peaks from which it quickly fell 20%. 
     

    GLL APR $11/12 bull call spread is .20, nice 400% gain if gold drops about 20%.  GLD March $110 puts are $3.95 and, if you get nervous, the Jan $110 puts are currently $1.95 so figure selling them if GLD breaks $115 ($1,170) and using that as the stop line. 

    If I could do a spread in the $100KP, I would but that function doesn’t work yet so I will offer .40 for 5 GLL Apr $11 calls and wait on selling the puts, hopefully for .30 or better. .


  46. $100KP/GLL – Oops, scratch that.  .30 was the bid on the Apr $12 calls.  It’s .60 for the Apr $11 calls but I’m going to offer .50 and look to sell the $12 calls for .40+ AFTER I secure the Apr $11 calls. 

    Treasury Auction went well. 

    Three more Case-Shiller-based measures – price-to-rent, price-to-income and real prices – give hints that home prices may still have a ways to go to the bottom.


  47. Phil What I can not understand is I am not trading with WSS for real only filling in the trades I have completed with TOS


  48. At the risk of being labelled a silly perma bull, reading the labor statistics for October I am surprised to see that employment actually  increased in a (slim) majority of states in October "In October, nonfarm payroll employment increased in 28 states and the District of Columbia, decreased in21 states, and remained unchanged in 1 state."
    ( http://www.bls.gov/news.release/pdf/laus.pdf )
    I am trying to decipher the source of this graph to see if they are being abusive with the numbers, but it’s pretty bullish for a return to job growth?
    http://3.bp.blogspot.com/_jlRX6zR7UgM/SvZj7F_apQI/AAAAAAAAAZk/0cWRMNTFQj0/s1600-h/jobloss.png


  49. AIB/Dflam – That’s a fine plan.  Simply turning it into a buy/write.

    The Treasury sells $42B in five-year notes at 2.175% (.pdf). Bid-to-cover ratio of 2.81; indirect bidders take 61%.

    URE is a very useful momentum play at $5.90 if you are short on SRS.  They are usually good for a run back to $6.05 for a quick .15 and sometimes they spike higher.  Stop if they fail $5.90 so risking a penny each time you try it, which means you only need to be right about 1/7 of the time

    WSS/Yodi – That’s just it though.  WSS isn’t dictation, if you have a lag and your timing was good, then you won’t get the fill on the 2nd system. 

    Jobs/Steve – I’m pretty sure there’s a lot of winter help being hired as retailers who laid off half their regular staff are adding holiday people. 


  50. Yodi/ZION
    I always play the front month when selling P or  C on this stock. The options move much faster with much greater profit on the short term. I will roll prior to expiration with a DD while waiting to the inflection move in the stock. Yesterday’s move was 14% upward in the stock setting up the perfect short call scenario. No need to buy the stock – you could sell a short straddle, or naked put. I personally did not mind the previous assignments, which is how I acquired the stock. I think ZION is safe, and will survive the financial crisis in the Southwest. I do not think the stock is the "canary in the coal mine" as it jumps up and down more like a "mexican jumping bean" – good for this strategy, IMO


  51. Phil,
    I often do a buy/write on stock and seem to get deep into trouble on one end. I never know when the best time to start rolling, stopping or taking profits on the options. What are your general strategies to avoid being deep in the money and take profits?


  52. Jobs – gotcha, I think FedEx/UPS between them announced 65K temporary hires or some such as well. Hmmmmm.


  53. Added two bull put verticals (330/340) in MA. Seems like it may want to run. I will make this a condor too by the close.


  54. Magret/ZION
    I do not follow the charts on this stock, as the moves are so impulsive. I just play the big jumps, either up or down.


  55. WFR 10 Jan11s are moving today…..OI is 15K.  The only other ones that high are 20  Jan10s.  Sumpin’ is up with them.


  56. get1 Like your jumping beans I have set up a small try run (strangle) and see how it jumps. They call them frijoles where I live.


  57. Yodi/ZION
    Just a caution… Citigroup downgraded the stock today, which forced the bean to drop. That really is the "pot calling the kettle black" Zion should be in the analysis business and give C the mother of all downgrades.


  58. Phil,
    You’re thinking fall Wed or Fri. What about shorting into the Fed minites ? I’m 40% cash, 30% TZA, and 30% assorted buy/writes and stradles (mostly Bearish)


  59. Thx morx on MTXX.  Something I have been advocating for a while, but it is tough to swallow, as the FDA can screw you and drive them down.  But, it is an all natural remedy, not Tylenol, pseudoephedrine, etc.  Should we nibble on a few shares here at 4.06…..??


  60. WFR / Pharm – 7.5 Jan 10 puts are also very high.


  61. gel1 ZION thanks for the warning but funny I still in the black (black Kettle)


  62. Phil;
    in managing my BIDU options to make $$$ to get even,
    Caller dec450 is down 31%, putter dec 400 is up 33 %, so slight gain.
    in which direction do you see Bidu go ?


  63. Buy/write/Roth – You can’t get into trouble on either end.  You can only get in "trouble" when the price of the stock falls below your "put to" price.  So if I want to establish a $2,500 position in WFR, I want to own 200 shares at $12.  Step 1 is to sell 1 Jan $12.50 put for $1.10.  That will either put WFR to me at net $11.40 or it will give me a $1.10 profit for doing nothing.  Even if you allocate the entire $2,500 I sidelined waiting for that play, it’s still an annualized return of $660, which is 25%.  Step 2: I have my cheap entry at $11.40 on 100 shares.  NOW I go for a buy/write, (assuming I sold the Nov $12.50 puts and had it put to me) selling the Jan $11 puts and calls for $2.10, which drops my net to $9.30/10.15. 

    So now our "danger" is WFR falls below $10.15 and we’re taking a loss as ANYTHING above that is profit and cannot be a problem.  Let’s say WFR drops to $9 (down 30% from where it began) and it’s put to me at $10.15 avg.  I can take a $230 loss and walk away or I can roll the putter and caller to the next $10 puts and calls that will drop my basis to $9 or less.  If WFR heads to $8, I am still out just $200 if I take the assignment and I have the same choices.  As I say over and over and OVER again to members – If you don’t WANT to own WFR for net $9 long-term, why the hell would you be buying it at $12 in the first place?  Buy/writes are part of a LONG-TERM ownership strategy.  Sure we get called away with a profit all the time but we are also happily accumulating stocks we like as they get cheaper.  If you don’t want a portfolio full of cheap stocks long-term – then you are very bearish and this is not a strategy for you.

    FDX Jobs/Steve – Oh, that’s a biggie right there!   Must be hard for the airlines to scale up for holidays these days with all the security vetting that has to go on…

    Check out the cute little triangles forming on the indexes on 15 minute+ charts.

    MA/Eric – I think they are off in retail fantasy land.   Of course gas is 2x what it was last year at this time so that may make up for a lot of half price sales at the stores.

    WFR/Pharm – Be careful because sometimes when we pile into something, we trigger an alert at Najarian’s board and then they jump in and then Wilkinson notes it later and suddenly the whole thing goes crazy…

    ZION/Gel – Just another one of those stocks that people have no actual opinion of, whatever the last analyst says I guess. 

    Fed/JRW – It’s going to just do whatever "they" want.  I wouldn’t bet heavy on it but I’m already bearish so the dye is cast.


  64. I’m not seeing the minutes at the Fed site but doesn’t sound like anything we didn’t know about.  Kind of stunning that Fed thinks GDP will grow 3.5%+ and unemployment will stay under 10% – they are so dangerously clueless

    There is certainly nothing "upbeat" that I’m hearing so flat to down is most likely.  Just watch that S&P 1,100 as that’s going to signal a big drop.  QQQQ above 44 would be an upside signal.

    Oh, here are the minutes.  

    BIDU/RMM – Down more likely than up.  Just watch GOOG, they will follow but, if we close red, expect China to have a bad day tomorrow morning.


  65. WFR – Najarian’s board Phil – that’s the point. 8) 


  66. Re: Buy/Write
    Do you always let the options expire or do you take profits on one end once there is a larger directional move?


  67. Phil/Zion… you are so right… that is why I ignore the charts on this one.


  68. pharmboy: Where do u see SPPI going in next few months?
    dflam


  69. Stupid long minutes this time - here’s SOME of the highlights:

    Staff Review of the Economic Situation
     

    The information reviewed at the November 3-4 meeting suggested that overall economic activity continued to rise in recent months. Manufacturers increased production in September for the third consecutive month. The gradual recovery in construction of single-family homes from its extremely low level earlier in the year continued, and home sales increased in the third quarter. Although consumer spending on motor vehicles declined in September after the expiration of government rebates, other household spending rose. Outlays for equipment and software (E&S) appeared to be stabilizing. However, the labor market weakened further, and business spending on nonresidential structures continued to decline. Meanwhile, consumer price inflation remained subdued in recent months.

    The labor market continued to weaken in September, but the pace of deterioration lessened from that seen earlier in the year. Job losses remained widespread across industries. The length of the average workweek for production and nonsupervisory workers decreased, and the index of aggregate hours worked for this group fell, albeit more slowly than earlier in the year. In the household survey, the unemployment rate rose in September to 9.8 percent, and the labor force participation rate fell to its lowest level of the year. Continuing claims for unemployment insurance through regular state programs declined through early October, but total claims, including those for extended and emergency benefits, remained high.

    Industrial production rose in September for the third consecutive month. A substantial portion of the third-quarter gain was directly attributable to a rebound in motor vehicle assemblies and related parts production, but increases in production were widespread across the industrial sector. Indicators from business surveys suggested that there would be further gains in factory output over the near term. Nevertheless, considerable slack remained in the manufacturing sector, as the factory utilization rate for September was up only a bit from its historical low earlier this year.

    For the third quarter as a whole, real personal consumption expenditures (PCE) rose at a solid rate, with noticeable increases in motor vehicles, furniture, electronics, and other durable goods. However, real outlays declined in September after a sharp increase in August. The monthly pattern in expenditures was significantly affected by swings in motor vehicle sales during and after the government’s "cash-for-clunkers" program. Real disposable personal income fell for the fourth consecutive month in September, reflecting the weakness in the labor market. Poor labor market conditions and prior declines in household net worth appeared to have weighed on consumer sentiment, and the October Senior Loan Officer Opinion Survey on Bank Lending Practices (SLOOS) suggested that many banking institutions continued to tighten standards for consumer lending in the third quarter.

    The responses to the October SLOOS indicated that banks continued to tighten standards on commercial and industrial (C&I) loans to firms. Meanwhile, conditions in the nonresidential construction sector generally remained quite poor. The recent trend in architectural billings was consistent with further declines in nonresidential construction, and employment in the sector continued to decline. The October SLOOS suggested that financing for new construction projects was very difficult for businesses to obtain. The Bureau of Economic Analysis estimated that businesses continued to liquidate inventories in the third quarter, but at a slower rate than in the preceding quarter.

    In August, the U.S. international trade deficit narrowed, as exports edged up and imports declined, but it remained wider than it had been at its recent low point in May. The increase in exports of goods and services was held down by a sharp drop in the volatile aircraft category. The decline in imports of goods and services was led by a lower volume of imported oil. In contrast, imports of machinery, automotive products, and industrial supplies increased.

    Staff Review of the Financial Situation

    Investor sentiment toward the banking sector appeared to deteriorate over the intermeeting period. Bank share prices fell, with equity prices for large banks declining more than those for regional and smaller banks. Credit default swap spreads for large bank holding companies were about flat, but they widened for regional and smaller banking organizations. Market participants reportedly remained concerned about the earnings prospects for banks in an environment of weak economic activity and rising loan losses.

    Debt of the private domestic nonfinancial sector appeared to have declined again in the third quarter, as estimates suggested that household debt edged down and nonfinancial business debt decreased. Consumer credit contracted for the seventh consecutive month in August, reflecting declines in both revolving and nonrevolving credit; issuance of consumer credit asset-backed securities also fell. Gross issuance of bonds by investment-grade nonfinancial corporations slowed somewhat in October, even as speculative-grade firms continued to issue bonds at a robust pace. CP outstanding increased, though gains were concentrated at a few large issuers. Bank loans continued to contract rapidly. In contrast, the federal government continued to issue debt at a brisk pace, and gross issuance of state and local government debt remained strong in October.

    So the consumers have far less credit available than last year and banks aren’t lending but the government continues to give them Trillions of dollars so they can lend – what a totally broken system.  I don’t see how we get from here to a Merry Christmas

    Bank credit declined in September and in the first half of October, as the contraction in C&I loans contributed importantly to a further decline in total loans over the period. According to the SLOOS, bank lending standards and terms tightened further and demand continued to decline, on net, for most types of loans in the third quarter. Commercial real estate (CRE) loans also continued to decrease, reportedly because of widespread paydowns and charge-offs. In addition, residential mortgage loans on banks’ books fell, and revolving home equity loans and consumer loans also contracted. The pace of decline in total loans at large banks continued to exceed that at smaller banks. The allowance for loan and lease losses rose further at large banks in September, but it was about unchanged at small banks.

    M2 appeared to have expanded at a moderate rate in September and October. While liquid deposits rose rapidly, small time deposits and retail money market mutual funds continued to contract. Meanwhile, currency increased amid moderate demand for U.S. currency from abroad.

    Staff Economic Outlook

    In the forecast prepared for the November FOMC meeting, the staff raised its projection for real GDP growth over the second half of 2009 but left the forecast for output growth in 2010 and 2011 roughly unchanged. The spending and production data received during the intermeeting period suggested that economic activity, especially household spending, was a little stronger in the summer than previously estimated. Also, industrial production increased more than had been anticipated at the September meeting. But with labor market conditions somewhat weaker than anticipated, earlier declines in wealth still weighing on household balance sheets, and measures of consumer sentiment relatively low, the staff did not take much signal from the recent unexpected strength in spending and output. Indeed, the staff boosted its projection for the unemployment rate over the next several years. Still, the staff continued to believe that several factors that were restraining spending would gradually fade. The staff anticipated that the strengthening of the recovery in real output during 2010 and 2011 would be supported by an ongoing improvement in financial conditions and household balance sheets, continued recovery in the housing sector, improved household and business confidence, and accommodative monetary policy even as the impetus to real activity from fiscal policy diminished.

    The staff forecast for inflation was little changed from the September meeting. Although oil prices moved higher, likely boosting near-term inflation, the staff also revised up its estimate of the degree of slack in the economy, leaving the forecast for total and core PCE inflation over the next two years little changed. With significant underutilization of resources expected to persist for several years, the staff continued to project that core inflation would slow somewhat further over the next two years.

    That was from the Fed meeting when oil was still under $70! 

    There’s nothing at all to get bullish on in this report.  They are pushing us up as hard as they can to give the impression that the Fed had good news but it’s BS.  What actually happened since 2pm is the dollar was knocked down 0.5% and that managed to move the dow up a whopping 0.15% and that is not good as we usually get a multiple move off the dollar.  Oil didn’t budge and is closing at $76.11 and gold is still $1,165.

    They are clawing us back to green and the VIX is trying really hard to touch 20 but this is all Dow and S&P as the Nas is still down 0.5% and the NYSE is down 0.3% and the RUT is down 0.88%, Transports off 0.97% and SOX are green, +0.3%, which makes the Nas even more pathetic looking. 

    2:30 Dow volume is 100M, very, VERY low, especially for a Fed day and this is exactly the kind of finish (dribbling back to green after a big dip) that leads to a gap down in the morning so I am now considering 60% bearish (DIA puts uncovered) into the close.

    Do you have the guts to go away for Thanksgiving with a bullish portfolio?  I wonder how many fund managers are answering that question with a yes? 

    It would be great to see a retest of 10,500 but I doubt they have the gas to get past 10,450 and that’s where I’ll be looking to take out the 1/2 DIA $104 putter, now $1.60 for about $1.45, probably with a stop at $1.50 (.10 trailing)


  70. Jomama/USG
    A position here would scare me plenty… Construction is dead and will be for a long time. There is a huge overhang on inventory, the unemployed are increasing in numbers and the reversal will be very slow. Additionally, the current zero interest rate policy the administration is following has created a massive underlying catastrophe in the making, which will eventually force a reversal in policy, like night follow day. Any rise in interest rates (even modest), will surely create more foreclosures in all real estate assets, and exacerbate the existing overload inventory of housing. Bottom line is….. building materials will not recover for a long, long time.


  71. Hi, Morx RE JNJ called away:
    I didn’t have the stock.  I have JNJ Jan 2011 55/60 call spreads, and I am selling front month calls/puts.  So, getting called away meant I got a short sell position.  I had to buy JNJ to cover the short sell, which ate away some of my profits.
    Damn!


  72. Najarian/Pharm – We could just mess with them, trigger all their bells in a sector and see how long it takes him to come on CNBC to talk about it.  (we shouldn’t do that, that would be wrong!)

    Buy/write/Roth – I never always anything.  Each month we have to see where we stand and each month we have to re-calculate to see if it’s worth rolling or if we should let it go.

    This seems very forced.  If a seller shows up in about 15 minutes, they are going to have a very hard time defending an EOD sell-off.   Let’s watch that 10,450 line closely….

    QQQQ broke 44, so that is a bullish sign if they hold it past 3pm. 

    Remember last week when the Dow was 40 points ahead of the DIA and I thought that was very strange.  Now Dow is 10,445 and DIA is $104.46 – that’s more like it. 


  73. Cap, I did a DD on HK at 20.70 this morning, fully covered.  Dumped my covers at 21 and now strapped in for launch.  You still long?


  74. Najarian/Pharm – Phil, that would best be left to professionals like GS!
    We could just mess with them, trigger all their bells in a sector and see how long it takes him to come on CNBC to talk about it.


  75. Phil: A little confused about the DIA putters.  Are you saying to buy back the putters even with a little loss, so that we go nude tonight?


  76. Sold 1/3 DEC 22 covers on HK at this level, could go either way from here.


  77. Do I see a stick save?  DIA putters are green!


  78. http://www.biospace.com/news_story.aspx?NewsEntityId=163710
    SAN FRANCISCO, Nov. 23 /PRNewswire-FirstCall/ — Poniard Pharmaceuticals today announced the sale of 3,465,878 of its common shares to Azimuth Opportunity Ltd. for gross proceeds of approximately $7.4 million, or approximately $2.15 per share, under its existing committed equity financing facility with Azimuth. The Company intends to use the $7.3 million in net proceeds from this sale to focus on regulatory and partnering activities for picoplatin, clinical development, other general corporate purposes and working capital. Based on its cash reserves, including the net proceeds from this offering, Poniard believes it has sufficient cash resources to meet its anticipated net cash needs to mid-2010.


  79. China Bulls/CGA… My position is up 30% in just a few months. The company did a small secondary at $15.60, temporarily stalling out the upward trajectory in price  appreciation. The funds raised will be put to good use and will increase their profit through their constant profit margin of 55% and ROE of 30%. This company has a similar business model to others we are familiar with, as they sell high priced fertilizer. ( GS sells high priced BS)


  80. SPPI/D – well, I don’t see them going down much further, as they have 140M in cash (~ 2.5/share), burn rate is ~40M/yr, and they make 40M/yr.  They just signed a deal yesterday with a Korean Drug Co. where royalties will come in (albeit small).  I like them here, and I have mentioned that I have the 2.5/7.5 Jan11 C/P (sold the puts) and 1/2 covered a two weeks ago when they spiked to 5.  So if you can pick up the 2.5 Jan11s for 2.5, that is basically buying the stock and cover with 1/2 5 Jan10s. 
     
    There is a burn for clinical trials, but from my knowledge the trials are not as large as asthma, etc, so the total outlay is not as large. They just take longer due to recruitment of patients and length to positives or failure….


  81. HK/MrM – bought in again last week on the dip (from your post).  Did a calendar cover 20 March10s with 4/5 23 Dec09s.  Even for now, and bought in this morning on the dip the 17.5 Jan11s 9 (so now a 1/2 cover).  Those are up…..nicely.  Should fall in to place, and will sell the 20 Dec09s tomorrow if they dip again…..HK has been very good for the account (so far).


  82. Agree completely about the Fed minutes Phil. Yuck!  I’m really worried about where we’re going to be in 1-2 years.
     
    Crude looks bad but OIH trying to put on a brave face. If it pops after inventories tomorrow, I may add a short there.
     
    Sold the other side of the MA condor, now back to being short.


  83. Phil,
     
    missed most of last two days, so hopefully you did not answer this previously.
     
    Wondering if your VIX play yesterday (22.50 Feb puts, sell Dec 22.50 puts=40cents) is even better play today as VIX dropped. Anything today that makes it a riskier play? If the market falls, then this thing will take off again, right?


  84. Phil,
    Sold 10 VLO Dec P for .89, now at 1.23 should I roll, if so to what?
    Thanks


  85. O pays its dividend tomorrow (it is a San Diego REIT).  After almost every dividend payment, they have gone down….


  86. Hi gel1 CGA
    Did the same deal when you anounced it a while back doing well on the March spread thks


  87. GS/Colberg – LOL!  

    DIA/Cwan – Buying back putters at $1.50 was profit, not loss I hope.  The idea was to go naked on the rejection at 10,450 – working perfectly so far…

    PARD/Colberg – thanks!

    This sell-off has nothing to do with the dollar, still pinned at $1.4965 to Euro and $1.6575 to the Pound and 88.5 Yen.  Gold at $1,169! 

    VIX/Ocelli – Yes, I like the play still but keep in mind they are 2 separate bets with the illusion of being a spread. 

    VLO/Jomp – I would just wait.  Still lots of premium. 

    This was, on the whole, a long way around to get to a flatline into the close. 

    DIA – Still naked and staying that way.  I have a gut feel we gap down tomorrow morning as people bail on this nonsense.  It’s risky and not for everyone


  88. Yodi/CGA
    I really like this one…. the fundamentals look very solid.. I am working on a few more plays that look as promissing and will send you a "heads up"


  89. buy back DIA putters: Sorry, I saw a different strike.  Nude tonight.
    Strange.  We dress up in the opposite direction of the weather.
    Nude: When we feel cold and temp going down
    Bikinis: When temp stays about same
    Full dress: When we feel hot and temp going up
    8)


  90. $100KP – Selling 10 PARD March $2.50 puts for $1.05


  91. Great gel1 looking forward to see them all from great China


  92. I know why we dress up the opposite direction of temperature:
    We are sadistic and we like to torture ourselves by AMZN!


  93. Hey Pharm, any thoughts on JAV?  Thx 


  94. SPG Dec 75Cs lost over 40% of their value on a puny little $2 move today. I love it.


  95. Dress Code/Cwan – Now I’m confused.  8-)

    OK, that was interesting.  Super desperate stick at the end.  They just HAD to pay up 15 Dow points in those closing seconds even though they could have bought lower any time in the previous 20 minutes…


  96. there’s so many things I don’t understand here, but I will try to digest a little at a time:
    phil, when you say" n fact, let’s call that a $100KP play, selling 5 WFR Jan $12.50 puts naked for $1.15." —that means you are selling WFR jan 12.5 puts without owning stock, right? so u get a credit trade. if the stock went down further, what can u do?
    also,  it would be nice if u could answer those question I have on weekly wrap up on bottom of comment, u can comment there: http://www.philstockworld.com/2009/11/21/weak-weekly-wrap-up-5/#comments
    I know my question is elementary level, but I need to understand that first before I can understand what ppl are talking about. I hope some day I can trade safely like all of u


  97. Phil
    why do you think oil today is down but ERY dropped 0.16?


  98. "OK, that was interesting.  Super desperate stick at the end.  They just HAD to pay up 15 Dow points in those closing seconds even though they could have bought lower any time in the previous 20 minutes"

    and somehow thats paradoxical

    Cwan is trying to say when the stock is hot be cool, and when the stock is cool be hot…right right right

     


  99. JAV/Soul – not really seeing much in them.  All their products are generic (diclofenac, ketamine and morphine).  They give all by patch or intranasal.  Pain is a HUGE, unmet market, and they have a approval in the UK for diclofenac Ketamine is a wonderful drug causing dissociative amnesia (I think it must be in the water on Wall Street), and is also in clinical trials for severe depression (not by them).   It acts on opioid receptors (like morphine), as well as other receptors in the brain.  The morphine patch angle is done, JNJ has a fentynyl patch from their old ALZA days, a 12B deal (yeah, remember that one – they closed the site last year).  So, if you want to take a chance for a nibble, might be worth it…but I like ARIA, CLDX and SPPI better.  Unfortunately, they are all cancer……


  100. Phil,
    Can you explain the trade below b/c I’m not sure I understand why you recommended what you did? Why can’t you just sell ATM puts and calls each month with the 2012 $10 calls? Something to do with the deltas? Thanks.
    GE/Japar – I like GE but I’d only do that call if you are selling something.  Actually, I’d rather have 7 2012 $12.50 calls than 5 $10 calls for about the same $3,500 as you sell the same Jan $16 puts and calls for $1.58 but you collect $790 in 60 days on one and $1,106 on the 7.  That means, over the course of 2 years, you’ll collect about 12x $316 more by taking 7 $12.50 calls or $3,792.  That’s an EXTRA 100% ROI for NOT saving yourself .50 in premium!


  101. Lynn – have you read the new members guide (PDF) at the top of the page?  Here are a few links to read as well.  The first is an excerpt from a book, the second is Investopedia.  I suggest VERY strongly you read all things b’f trading anything.  Then paper trade for a while…..if you are not already.
     
    Link 1
    Link 2


  102. anyone pls help dicipher:
    "Speaking of the usual suspects.  WFR finally found a floor it wants to defend at $12.   Selling Apr $12 calls for $1.75 and Apr $11 puts for $1.15 is net $9.15/10.58, a nice 33% profit if they hold $12. You can initiate ownership by just selling naked Jan $12.50 puts for $1.15 as this stock is usually nice and volatile with lots of things to sell."
    selling Apr 12 call and Apr 11 put get a credit of $2.9, what do u mean by net $9.15/10.58 if they hold $12, how come 2 prices. and initiate ownership by selling naked Jan 12.5 puts? what does this mean too?
    sorry for being so dense, reading a book with hypothetical example is one thing, to understand real trade is another, thanks


  103. Pharmboy, to answer your question, I am reading it and re-reading some parts too. But like I said, the book example is understandable but I also hope to understand this board a bit along the way, esp the way it was said here is a bit different from the book too. I will try to ask only when market is closed


  104. Lynn
    the first option: buy stock @12.05 and sell $12 calls & puts -total credit $1.9 – it is mean that you get a stock (vertually) for 9.15 (12.05 – 1.9)
    the second option: just sell apr12 put for $1.15 if price continue to decline – you will get a stock at $12 minus what you got for put = total you will get a stock at $10.85


  105. Lynn,
    Phil’s favorite strategy to buy good stock even cheaper that today’s price, this is how he is doing it


  106. Lyn RE: WFR and Phil’s shorthand
     
    If you buy 100 shares @ $12.05 and sell both the puts and calls for $2.90 you get called away in April with a net entry of $9.15 in WFR is above $12 in April.
     
    If WFR is below $12 and another 100 shares is put to you because you sold the puts, you now own 200 shares for a net cost of $10.58 on 200


  107. Hi, Kustomz:
    "Cwan is trying to say when the stock is hot be cool, and when the stock is cool be hot…right right right"
    Wow!  That’s super!!  I couldn’t think of that!


  108. Lynn – ask away, many here can help.  Language here is pretty consistent from Phil.  Buy and sell are self explanatory.  If you sell the put, you are at risk of owning the stock if the put (P) finishes in the money (ITM) or anytime the putter (seller) wants to unload the stock.  If you buy the put, you have the right to buy the stock at that strike price (your option). Same for calls.  So when one says selling naked Jan $12.50 puts for $1.15 (WFR), then you do not necessarily own the stock.  Buy writes are selling the calls and puts for better entry prices. 
     
    So in the above (Tchay points out), buying WFR here at 12.20 and selling both C & P for 2.9 is a net entry of 9.30 12.2 – 2.9 = 9.3 (of course * X shares).  This is with equal numbers of stock, puts and calls.  IF it is PUT to you (you sold the puts to someone else), you will have 2X the number of shares at a net entry of 12.2 * 100 – 1.75*100 – 1.15*100 + 11 * 100 = 9.3 *100 + 11*100 = ~ 10.15.


  109. thank you for explaining tchayipov (the name reminds me of tchaikovsky), it makes it clearer.
    So Phil is saying to do option 1 or 2 as per your explanation, not "Selling Apr $12 calls for $1.75 and Apr $11 puts for $1.15" both at the same time. What confused me even more is "You can initiate ownership by just selling naked Jan $12.50 puts for $1.15" because I wonder if he’s suggesting to do all 3.


  110. Lynn,
    phil gave two diffirent options to start that trade, second one is little bit safer because need less money and if stock will continue to decline it will be easer to handle it (you can roll that put down and far away by time if you will be unconfortable to get a stock, or if you will be assigned, you will have only one set of stocks at lower price, with first option you will have two sets of stocks (because you already have one plus you will be assign with second set because of your short put)


  111. Lynn/
    see first option: it is buying stock and sell PUT AND CALL AT THE SAME TIME with total credit $2.9
    now let’s play different scenarios:
    if price will be above $12 at exparation your stocks will be call away and what you will get: you pay for stock $12.05 – 2.9 = 9.15 and call away for $12 it is 2.85 profit / 9.15 investment = 31%
    if price will decline you will assign with second set of stock @$11 so your avarage price for stocks will be 9.15 +11 / 2 = 10.075


  112. Stuff/Lynn – If you sell the Jan $12.50 puts for $1.15 and the stock "goes down further," then the stock will be put to you (you are forced to buy it) at $12.50 and you keep the $1.15 so your net cost of the stock is $11.35.  Since WFR is trading at $12.15, that’s a 6.5% discount to the current price.  If the stock drops 10% to $10.94, then you will own the stock and be down 41 cents and you do whatever it is you do when you own a stock that is down 41 cents.  If WFR drops 20% to $9.72, then you will own the stock and be down $1.63 and you do whatever it is you do with a $11.35 stock that is down $1.63.  This is not meant to be complicated – that’s all there is to it.

    As to the other questions, I’ll try to remember to go back and answer your questions later but it goes against my normal, forward-moving habits so it would still be smarter for you to copy and re-paste the questions here, where I could answer them along with any others.  I don’t want to be obnoxious, just real as I do have a life outside of this and I’m finishing up now and will stop back later and there will be more people HERE with more questions I’ll be answering and then I will have to remember to scan back and find your question, hit the link and specially respond there just for you.  Just a realistic assessment of the situation…

    ERY/Tcha – ERY has very little to do with the price of oil.  It is a 3x inverse to the Russell 1,000 Energy Index, which includes XOM, CVX, OXY, SLB, APA, HAL, XTO, BTU….  so there’s a loose correlation with the actual price of oil at best but the whole sector tends to move with oil so it’s as good a place as any to place a bet on crude prices – it’s just not perfect.  

    GE/Japar - I’m saying that you can sell the SAME puts and calls against the $12.50s as you can with the $10s but the $12.50s have .50 more premium.  Since you can buy 7 (seven) of the $12.50s for the same price as 5 (five) of the $10s, I was illustrating that your ability to sell 7 puts and calls each month rather than 5 puts and calls each month for the SAME money far outweighed the extra $350 in premium you would pay by taking the 7 $12.50 calls over the 5 $10 calls.  Just trying to get you to think about your trades a little differently.  

    WFR/Lynn – In this particular case, Google "How to Buy a Stock for a 15-20% Discount" and that will explain the strategy to the WFR play.  As to part 2, there is an assumption of people understanding the concept (as we do about 12 a week) and, as I think we just discussed today, if you are first entering a position you can initiate your BUY leg of the BUY/write by SELLING puts only.  That right there gives you an entry discount and you either win (and the options you sold expire worthless) OR the stock is put to you at your net target price and THEN you execute the WRITE leg of the buy/WRITE strategy and sell another set of puts and calls against it. 

    I will hate myself for saying this (as it complicates things) but the very great advantage to initiationg a buy/write by first doing the short sale is you DON”T own the stock so if WFR (in this example) falls to $10 and the Apr $12 puts are $2, you can still sell the $11 calls for $1 (guessing) and, since you didn’t buy the stock yet and the stock is at $10, then you have lowered your effective entry basis to $7.85/9.93 and you don’t need to buy the stock at all unless it goes back over $10 and, even if you buy it at $11, your basis would be $8.85/10.43 with the stock at $11. 

    See, aren’t you glad you asked?

    Good helping guys – Thanks! 


  113. The Treasury sells $42B in five-year notes at 2.175% (.pdf). Bid-to-cover ratio of 2.81, vs. a recent 2.51; indirect bidders take 61%, vs. a recent 52%. Direct bidders down to 2.9% vs. recent 5.6%. Treasurys held mild gains; the 30-year bond +0.05%; 10-year +0.09%.

    "Even within the confines of a series of positive auctions this year, today’s auction was… tremendous," Miller Tabak’s Dan Greenhaus says, with indirect bidders taking 60.9% of the $42B in five-year notes – the third highest on record. For now, "overall economic and rate uncertainty along with year-end flows into fixed-income products are bond market supportive." Bill Gross apparently agrees.

    New Federal Reserve limits on overdraft fees could cut $15B out of banks’ revenues, says Oliver Wyman’s Michael Poulos – suggesting that lenders will scale back branches and look for new charges, such as minimum balance fees, to make up the difference.

    UBS (UBS) disputes Monday’s report from S&P, which ranked UBS near the bottom of the world’s biggest banks according to their risk-adjusted capital (RAC) ratios, at 2.2%. UBS says S&P glossed over two important balance sheet components, including which its RAC jumps to 7.1%. Nomura’s Jon Peace sides with the Swiss.

    "It’s possible that 50% (of bank losses) are still hidden in their balance sheets," says IMF chief Dominique Strauss-Kahn, saying that’s more the case in Europe than in the U.S. In an interview to appear in Le Figaro tomorrow, Kahn added the IMF thinks the euro is a bit too strong.

    FOMC minutes: Another range of views on exit strategies, with some participants backing asset sales, while others expressed concern about reducing the balance sheet ahead of an eventual rate increase. There was agreement on the improving economy, as well as uncertainty how much of that was based on temporary programs. All support purchasing $1.25T in agency MBS and specifying $175B in agency debt purchase by end of Q1.

    You can almost make out the faint outlines of an inflation debate, says WSJ MarketBeat, if you squint really hard at the Fed minutes.

    UBS ponders a "Buffett bubble" in shares of rail stocks, which have risen 10-14% since Berkshire Hathaway (BRK.A) agreed to acquire Burlington Northern Santa Fe (BNI). Noting boom-and-bust cycles have followed other Buffett rail moves, UBS warns of a "risk of industry underperformance between now and year end if some of this Buffett-inspired enthusiasm for the group begins to wane."

    From Financial Armageddon, a roundup of of holiday spending surveys, with salient excerpts. "Those who have been counting on a V-shaped recovery in the (consumer-dependent) U.S. economy might want to reconsider."

    The upside of U.S. unemployment is that corporate profits are rebounding much quicker than expected, as witnessed by today’s startling 14.5% jump. As Tom Armistead explains, "If you fire people faster than your business declines, profits will increase." Based on the correlation between profits and share prices, he finds support for an S&P 500 climb to 1,250 – a further increase of 13%.


  114. Thank you thank you all (Pharmboy, Cafords, Tchayipov and Phil) for enlightening me. I think it makes sense to me now but I will read and digest these till I totally get it.
     
    I know I am probably the worst here. I was trying to cancel the subscription because it’s way over my head but the person who emailed me back encouraged me to hang on and try to see what ppl are saying here so I am trying to do just this. Like Phil said, we all have other things(and ppl too) life so I am also trying to read as much as I have time. That’s why I greatly appreciate your help here as it distracts you from dong your trade and my questions are too basic to you, instead of any great trading ideas.  And hopefully I can regain all the loss in the past 2 yrs.


  115. I know its hard to go back to read things, i get lost with so many post too myself. I am just embarrassed to post these elementary qs so I was hoping you can answer them there by pasting the link for you but i will see if this example answers some of my previous question first. if not, I will re-paste here, phil.Thank you


  116. Lynn
    don’t expect to get reach fast here, but if you wont do stupid things you can get easy 30 – 50 % per year, just to buying good stocks at discount (as we discussed) and sell monthly premium of calls and puts


  117. lynn2long- a word of advice, for what its worth – paper trade some of these concepts or styles of  option trading. You don’t have to do them all. For example, buy/writes or naked puts selling or covered call selling etc. My guess is you will find something that appeals to you and a light will go on in your head. Focus on the one or two that make sense to you; get good at them and just don’t worry about all the other stuff. You can make a very good living just selling covered calls and naked puts and not do anything else, for example. This can all be very complicated stuff looking from the outside in. But, now you are inside and need , perhaps to break things down into small pieces which are easier to digest. Remember that the only stupid questions are the ones which don’t get asked.


  118. Pstas/ good advice
    Lynn and others, if you have any questions about strategies and lingo fill free to ask any of us, lots of guys will be happy to help
    just imagine how busy is Phil during trading hrs (digest news, post opinions, answer questions) if you have an emergency (loosing trade which need to be fixed) you can ask Phil, for simpe questions all other guys will help


  119. HK … see my 9:31 am note; hope someone followed me on this !


  120. Lynn:
    I have to echo the comments made by tchayipov as to what your trading expectations should be. I have been trading for quite a few years and in good years made about 25%. After joining PSW, I followed closely the PSW strategy, as tchayipov has outlined and my trading profit for this year is close to 70% to date. For fun, I like to mix in a few "Hail Mary" plays that really worked out well, but overall the simpler Buy/Write strategy, as presented by Phil so often, created the majority of the profit. Best advice I can offer, is to read everything you can and phase your trading in slowly after you feel very comfortable with the strategy, knowing what and when to do to make adjustments, and when to exit the trade to your advantage..


  121. Cap – I stinky inky many did….MrM and I are definitely in.


  122. Mocha …. still in; but sold some of my buys (stock and options) on the pm move.
    Will continue to trade it.


  123. Lynn, we help each other here as well, so keep the faith…..also leave a big bunch of cash behind so that you can sLLLOOOOWWWWly ease into positions.  For instance with WFR – sell 2 options for 1.15.  That eats 2K of margin (for IRAs) and you can learn to roll those or do as Phil says.  $200 win on that one and that is 10% for one play…..  A few wins, a few losers are ok in the beginning,  just so you get the hang of things and the winners outpace the losers. 
     
    Also, look in to TOS for trading (if you are not with them already), they have a low fee for smaller options plays (1.50/option or less if you negotiate a bit, which eats less into your profits/losses).


  124. good job on HK Pharm…,


  125. thanks again everyone, :D
    phil, u did complicate things again, but i guess ur saying if WFR drops again, i can sell another call to lower the cost.
    Pharmboy, when u mentioned eats 2K of margin with 2 option? Is it cuz if put to u, u need 2k to buy 2000 shars?


  126. also, someone mentioned an email address to negotiate a discount price for option trading. could he pls post it here again?


  127. Lynn
    just call TOS and say that you are a member of FSW and they give you $1.50 per option without ticket fee (which is pretty good), looks like they don’t do any deeper negotiation for now unless you show them good volume


  128. Lynn
    I geuss Phil tried to explain that you don’t need to execute all legs of this strategy at the same time,
    you can start with sell just put, if stock will continue to decline – next step you can sell call and last to buy a stock – this way you can lower your entry price even more


  129. look at new positions for 100k portfolio: Phil adviced to sell just puts for now, if market will cooperate we will make good profit from selling naked puts, if market wont cooperate, probably next step will be establish buy/write positions, we will see


  130. oh ok, Tchayipov. Thanks for sharing these steps. I certainly didn’t know that


  131. Hi Fellows,
    Well reading through all the correspondence with Lynn, I must say This group is a team helping each other out.
    After many years of trading options the basics are realy simple and reading through our daily comments one can pick up a lot. Yes Phil has a lot on his plate and you guys realy help out. Sometimes it would help if Phil would express himself in a more simple and clearer way, so saving him the actual time to explain things twice or even three times, specially for new members.
    But in general I am highly pleased to meet and be part of such a great team. Any newcomer being frustrated I can very well understand. More difficult if you start in option trading. Just learn the basic and hang in and do not give up, you find this pays great dividends. See you tomorrow.


  132. belive me guys, after couple of weeks you will pick up Phil’s lingo, he is a NewYorker and speaks very fast and he types same way as he speaks


  133. phil, nice little service for you for the links you keep trying to hammer into our brains :)
    http://lmgtfy.com/?q=How+to+Buy+a+Stock+for+a+15-20%25+Discount


  134. Clarify: I don’t mean to complain nor do I feel bad about anyone. I am sure Phil has a lot on his plate. Just by all that he posted each day. I could hardly keep up with all he’s presenting. Fr economy at large to the details of each trade.
    I just simply think I should start first by asking one trade at a time to see if my "guess" or "understanding is correct or not. thank you all


  135. Since we are nearing a climate summit, I wanted to throw this out there. I know we stay away from politics and religion but this is just too interesting to pass up. :-) I’m curious if anyone wants to weigh in. Here are some interesting tidbits:
    We are carbon-based lifeforms. Cap-and-trade is focused on carbon emissions for countries/corporations. The molecular structure of carbon is 6-6-6. The New Testament says individuals one day will not be able to transact without proof of that mark (666). We seem to be approaching the ability to track nearly every single purchase (except black market, of course), through paper trail now and through RFID in the future. We are already able to roughly estimate each individual’s carbon footprint. Any thoughts?
     
    I think it is conceivable in the future that we could have a form of carbon-emissions tracking at an individual level and, BAM!, prophecy fulfilled…


  136. tchay, I read that collar trade should be the foundation of our trading so can u see if my understanding is right or not:

    1 start with sell just put,
    2 if stock will continue to decline – next step you can sell call
    3 and last to buy a stock – this way you can lower your entry price even more
    4 buy put to protect gains
    5 sell call to lower cost
    I am trying to combine what i learn today with collar trade. Does it make sense in real trading?


  137. lynn,
    let’s lern one strategy at a time, collar trade is complitly different strategy, don’t put everything in one bowl
    first 3 steps is a buy/write strategy
    if after step 3 stock continue to decline (probably you choose wrong stock and/ or at wrong time) but any way, you will assign to second set of stock ( because you sold put), but good news – your other options will be expared worstless, so you will stuck with 2 sets of stock – first set is quite cheep because you sell put and call aginst it and second set is at strike of your put, after that you can sell again calls and puts against your both sets of stock, and make it much cheeper.
    unless your stock wont go to buncroptcy, this way sooner or later you will get your 20-30% of profit,
    you just need to have cash to buy new sets of stock, this is why money management is very important ( start your position with not more than 30-40% of what you plan to use for this trade, and keep your portfolio balanced – so doesn’t matter what market is doing, you alway have winning trade which give you additional cash to adjust loosing trades


  138. or you can roll your short put and call at lower strike if you wouldn’t like to be assigned with second set of stocks, but for both cases you need additional money so make sure you have it, and in this situation ask Phil what is better to do, he is very good to fix this kind of crap


  139. sorry for my spelling mistakes, I’m not an English speaking person,
    so it is just a proove that if I can understand Phil – everyone can


  140. I thought everyone here reads the stock and option book up here on the site. Thats why I thought we used the collar trade as a foundation per book recommendation.


  141. Good morning!

    Once again it’s a low-volume Wednesday and the futures are popping!  They got the Euro over $1.50, the Pound is over $1.67 and the just 87.63 Yen to the dollar but the Yen didn’t rise until 3:25, when the Nikkei closed up 40 - so I don’t think you can really have more blatant manipulation than that.  Still, gold is now over $1,180 for an ounce and it’s either a blow-off top or the official death of the dollar.  Oil is still $76.38 so I’m still leaning towards blow-off top for gold but note that our GLL play will fill at .50 and it will be incredibly dangerous as gold looks like it may test $1,200 now

    Learning/Lynn – It’s a process.   You wouldn’t go to law school and expect to go in front of the Supreme Court after a few months and you wouldn’t go to medical school and go home at spring break to give a heart transplant to your grandfather – that’s just not how life works.  This is NOT a get-rich quick scheme – this is learning a process and building skills that can help you be a better investor for the rest of your life.  The trades themselves take months to play out so trying to understand them in a day or even days is futile.  As many have said, practice makes perfect and either trade small or paper trade so you can SEE the strategies play out over time – that’s how you will really understand them.

    As to collars – I am not a big user of them myself (I didn’t write that book, Option Sage did) as it’s a stock-based strategy and that was written at a time when the markets were much more steady than they are now.  The buy/write strategy is riskier than a collar but much more rewarding on the average.  Collar trading returns keeps you in a channel, which is fine with dividend-paying stocks but, with commodities doubling up in a single year, that may not be a satisfactory long-term investing strategy. 

    Our guy at TOS is scott@thinkorswim.com - I’m hoping people are getting at least $1.25 per contract with no other fees.  It does depend on your trading volume.

    Clarity/Yodi – E=MC2 is as clear as it gets explaining the relationship between matter and energy.  Of course you can ask what E is and what M is and what C is and then there are thousands of books devoted to discussing what this equation really means and how it applies to physics and, to this day, there are still people who argue that it’s flawed.   You can’t expect something that is not at all simple to be made simple just because you wish it to be so…   The market has thousands of variables that change every day and each stock has it’s own variables and even the options we trade are not constant as the VIX not only fluctuates from day to day but sometimes the long-term VIX is lower or higher than the short-term VIX (and did you know there is a Nasdaq VIX that is different from the regular VIX?) and all that profoundly affects the strategies you may want to pursue at any given time.  Stocks are driven by their own performance, the sectors’ performance and the newsflow and, of course, things like the dollar can affect your stocks on any given day that have nothing at all to do with the fundamentals.  So, would I be doing you a favor by pretending I can make it "simple" or are you better off learning how to adapt and survive in constantly changing market environments?

    NYC/Tcha – You know it.

    LOL Ajay – That’s great!

    666/Ac – So you are saying the whole New Testament was nothing more than investing advice?  8-)